CEE MARKETS 3-Zloty leads CEE fx lower on poor data

Reuters Staff

6 Min Read

(Adds new prices, comments)
* Currencies, bonds ease, Polish C/A figures still weigh
* European sentiment still supportive, equities rise
WARSAW, March 14 (Reuters) - The Polish zloty lost
more ground on Wednesday due to disappointing current account
and inflation data, triggering sell orders across regional
currencies and government bonds that have enjoyed a strong run
this year.
A widening of Poland's current account gap by almost 500
million euros ($655 million) in January raised concerns that the
economy was increasingly unbalanced.
Market players also said the fresh opening of long forint
against short zloty positions might also be behind the recent
downward move of the zloty, after it racked up gains last week
amid optimism created by Athens' debt swap deal.
"We continue to see profit taking in the currency markets
after Greece reached a deal with its creditors. For now, we
don't see much room for a significant zloty weakening," said
Bank BGZ currency dealer Piotr Poplawski.
Dealers said publicly-owned commercial bank BGK was in the
market earlier on Wednesday selling substantial amounts of euros
to support the zloty, but it later eased back.
By 1722 GMT, the zloty had lost 1 percent versus
the euro to bid at 4.151, the forint had edged 0.4
percent lower to 292.5, while the Czech crown eased
0.3 percent and Romania's leu shed 0.1 percent.
Yields on Poland's 10 year government bond rose 6 basis
points on the day to 5.4 percent.
"The zloty was hit as foreign investors sold bonds after
yesterday's high inflation data and a much wider-than-expected
current account deficit," said a Warsaw-based trader. "We also
have profit taking after this year's rally."
Polish 10-year interest rate swaps rose 8 bps,
reflecting an erosion of market expectations for interest rate
cuts later this year following higher-than-expected inflation
data for February, published on Tuesday. [IDn:nL5E8EDA07]
Despite rising, Polish bond yields are still close to 6-year
lows reached at tenders on Wednesday, in part reflecting market
satisfaction that Warsaw has already raised nearly half the debt
it intends to borrow this year.
Credit default swaps (CDS) on the 5 year bond also rose
slightly. On Tuesday, for the first time since it joined the
European Union, Polish debt was cheaper to insure than French.
RATE CHATTER KNOCKS FORINT
The forint has had a relatively strong run this year after
weakening through 2011, however it has been vulnerable to
setbacks throughout the euro zone crisis due to its fragile
economic health and high level of debt.
News on Tuesday that the central bank discussed cutting
interest rates despite higher-than-expected inflation at 5.9
percent also weighed on the Hungarian currency.
That discussion was based on growing concern that the
economy might drift into recession. Minutes from the bank's
February meeting showed some rate setters were optimistic
Hungary could cut rates if and when Budapest secured an
international financing backstop from the EU and IMF.
Hungarian markets are closed on Thursday and Friday for a
national holiday.
Though inflation data weighed on currencies and bonds across
Central Europe, sentiment across Europe remained supportive to
equities.
Poland's main stock index rose 1.7 percent, bringing
its gains since the end of 2011 to 8.3 percent.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2012
Czech crown 24.624 24.563 -0.30% +3.74%
Polish zloty 4.151 4.113 -0.92% +7.56%
Hungarian forint 292.51 291.25 -0.43% +7.55%
Croatian kuna 7.516 7.533 +0.23% 0%
Romanian leu 4.364 4.359 -0.11% -0.99%
Serbian dinar 110.86 111.01 +0.14% -3.53%
Yield Spreads
Czech treasury bonds
2-yr T-bond CZ2YT=RR -3 basis points to 111bps over bmk*
7-yr T-bond CZ7YT=RR -3 basis points to +144bps over bmk*
10-yr T-bond CZ9YT=RR -3 basis points to +183bps over bmk*
Polish treasury bonds
2-yr T-bond PL2YT=RR +1 basis points to +430bps over bmk*
5-yr T-bond PL5YT=RR +1 basis points to +389bps over bmk*
10-yr T-bond PL10YT=RR +3 basis points to +344bps over bmk*
Hungarian treasury bonds
3-yr T-bond HU3YT=RR -9 basis points to +782bps over bmk*
5-yr T-bond HU5YT=RR -4 basis points to +755bps over bmk*
10-yr T-bond HU10YT=RR +2 basis points to +674bps over bmk*
*Benchmark is German bond equivalent.All data taken from Reuters
at 1822 CET.Currency percent change calculated from the daily
domestic close at 1700 GMT. For related news and prices,
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($1 = 0.7628 euros)
(Reporting by Reuters bureaux; Writing by Dagmara Leszkowicz;
Editing by Ben Harding)